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US Dollar, EURUSD, USDJPY Talking Points:

- The early-portion of this week saw the bullish theme in the US Dollar take a break as the currency pulled back from the fresh two-month highs that printed last Friday. The currency found a bit of support on Wednesday around the release of FOMC meeting minutes from the January rate decision; but buyers have yet been unable to re-invigorate the bigger-picture bullish theme in USD.

- For next week, Jerome Powell’s Humphrey Hawkins testimony looms large, set to take place on Tuesday and Wednesday. Around the US Dollar, strategies of weakness would likely keep the longer-term range formation in EURUSD of interest. On the other side of USD, bullish strategies would likely be drawn towards the continued strength in USDJPY, which remained rather strong this week despite the US Dollar’s early-week pullback.

US Dollar Tries to Claw Back Early-Week Losses

This week opened with a pullback in the US Dollar as the currency continued to move-lower after last week’s resistance test. That pullback lasted all the way into Wednesday’s release of FOMC meeting minutes from the January rate decision, at which point prices began to tilt-higher again and have continued to do so as the weekly close nears.

At this point, the 96.47 level can be seen as assisting with that support, with 96.30 holding this week’s lows. The big question for next week is which of these themes will remain most prominent? Will a deeper pullback develop after a short-term lower-low printed on Wednesday? Or will buyers remain in-charge, much as they have since the January FOMC rate decision? On the economic calendar for next week is a particular driver that could drive either of these scenarios, and that’s Tuesday and Wednesday Humphrey Hawkins testimony from FOMC Chair, Jerome Powell.

DailyFX Economic Calendar: High-Impact Events for the Week of February 25, 2019

US Dollar Short-Term

For next week, the potential for a deeper pullback in the US Dollar remains, and this would largely be taken from a shorter-term observation after this week saw a fresh lower-low print on the heels of Tuesday’s lower-high. For this theme to remain workable, traders would likely want to see a hold of resistance inside of the 97.08 level, which helps to mark the Tuesday high. For next areas of support, the 96.30 level that held this week’s low remains of interest, with the 96.04 Fibonacci level lurking below.

US Dollar Two-Hour Price Chart

US Dollar Longer-Term

On a bigger-picture basis, this week’s pullback can be looked at as just that, a temporary pullback in a larger bullish theme. Encouraging for this scenario is the fact that FOMC drivers appeared to elicit topside runs in late-January and again this week after FOMC minutes were released. Traders focusing on this theme would likely want to watch for a hold of this week’s swing-low combined with a challenge of that 97.08 swing-high from Tuesday. A topside push through that zone opens the door for a re-test of 97.30, followed by the November/December Double-Top at 97.71.

This week brought an item of excitement as prices started to push off of the support side of that formation. But buyers appeared to have little tolerance for EURUSD spot prices above the 1.1360 level, and over the past four trading days, this level has helped to hold the highs in the pair. The big question for next week is which of these themes takes over? Will the longer-term range formation hold as prices in the pair tilt-back towards the 1.1448-1.1500 resistance zone? Or, will shorter-term sellers take another swing at taking out the longer-term support zone that runs from 1.1215-1.1300?

EURUSD Daily Price Chart

USDJPY Builds Ascending Triangle

Despite the US Dollar’s pullback earlier this week, USDJPY escaped relatively unscathed, as buyers continued to push higher for continual revisits to the 110.86 Fibonacci level. This has helped the pair to ride a bullish trend-line that started after last week’s support test at 110.30, and this has helped to form a short-term ascending triangle formation in the pair.

Earlier in February, I had looked at a similar albeit longer-term permutation of a similar formation. An ascending triangle has higher-lows to go along with a horizontal level or zone of resistance; and these will often be approached in a bullish manner, looking for the enthusiasm that’s driven buyers in at higher-lows to eventually take-over the horizontal zone of resistance. This keeps USDJPY in an interesting spot for USD-bulls, with a topside break of this week’s resistance re-opening the door for topside breakout potential.

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